Mon, Oct 22, 2018 - Page 16 News List

Taiwan to be hit as trade slows: Allianz

TAKING MEASURE:If the US levies 25% tariffs on Chinese imports, world trade growth could fall by 2 percentage points, the firm said, adding that Taiwan’s growth would slow

By Kao Shih-ching  /  Staff reporter

German insurer Allianz SE on Friday forecast the global economy would grow more slowly next year as the world faces macroeconomic challenges, saying that Taiwan and Hong Kong would be hit the hardest among major Asia-Pacific region economies by the US-China trade war.

The world economy saw robust growth this year and is on course to expand 3.2 percent from last year, but the momentum is waning and the pace of expansion will fall to 3.1 percent next year, as declines in major economies offset increases in Latin America and Africa, Allianz chief economist Michael Heise told a conference Allianz Taiwan Life Insurance Co (安聯人壽) held in Taipei.

The Munich-based group forecast that economic growth in the US would fall from 2.9 percent this year to 2.5 percent next year and that of the EU would drop from 2.1 percent to 1.8 percent, while the Asia-Pacific, the “engine of global growth,” would decline from 4.9 percent to 4.8 percent.

The US economy this year has been supported by robust domestic demand, buoyed by Washington’s expansionary fiscal policy, as well as US President Donald Trump’s tax cuts and infrastructure development plans.

“However, these policy measures will not be continued next year,” as the US’ budget deficit is to rise to US$779 billion in the 2018 fiscal year, the highest level since 2012, Heise said.

With the escalating US-China trade war, global trade growth would decelerate, but remain resilient this year, rising 3.8 percent from last year, Heise said.

However, if the US were to levy a 25 percent tariff on US$200 billion of imports from China next year, global trade growth could drop by 2 percentage points within two years, he said.

“Higher tariffs means consumption will weaken due to higher prices,” Heise said, adding that a slide in trade growth due to a full-blown trade war would threaten the global economy and nations in Asia, with Taiwan and Hong Kong facing the biggest threat at more than twice the suspected effects for China, while India and Indonesia would be the least affected.

The Taiwanese economy “was good in 2017, is still good in 2018, but will slow down in 2019,” Heise said.

With China accounting for 40 percent of its exports, Taiwan would see lower export growth next year due to the expected decline in China’s demand and shifts in regional supply chains due to the tensions, he said.

“Taiwan’s currency performed pretty well,” as the New Taiwan dollar remains stable and has fluctuated within a reasonable range against the US dollar thus far, he said.

“We do not expect a strong rise of interest rate in Taiwan,” as the central bank has shown no intention to prop up the currency by hiking its interest rates, he added.

Taiwanese economist Ma Kai (馬凱), who also attended the conference, said that if the NT dollar were to fall below NT$31.5 against the US dollar and the US Federal Reserve continues its interest-rate hikes, Taiwan’s central bank would be pressured to raise rates to curb capital outflows.

The US-China trade war is unlikely to end soon, so local businesses must prepare for the worst, Ma said.

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